Thursday, May 19, 2022

Green Investments Are Not Central Banks Responsibility, Says Raghuram Rajan

Despite burdening the central banks, the government should promote sustainable investments in the country, suggested the former Reserve Bank of India governor, Raghuram Rajan.

He stated that the central banks already have other significant policy commitments to look after.

During an interview with Reuters Global Markets Forum on Wednesday, Rajan stated that the central banks already offer a wide mandate on financial and monetary stability, therefore, it should not be their responsibility to publicize politically-driven unlegislated areas like “green investments”.

He further explained, “Asking the central bank to say you should buy only green bonds, not brown bonds, etc., is asking the central bank to impose its own views on something which is primarily a fiscal matter.”

Rajan believes that the central banks should now start analyzing the financial stability of green investments and other threats like cryptocurrencies and cyber security. 

Though he sees cryptocurrencies as a threat to the market, the former RBI’s governor believes that these digital assets have a ‘potential future’, especially stablecoins because they are well-regulated. But Rajan also mentioned that other than ‘heady environment’, it has not been clearly informed which fundamentals support the value of cryptocurrencies in the market.

Rajan, who earlier was part of the International Monetary Fund (IMF), stated, “I would be much more confident about the value of these cryptos once they find proper use cases such as an effective means of payment, especially in cross-border transactions.”

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